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Newbie Options Trading

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#121
Johan said:
I would like some advice on how to play it from here on.
Click to expand...

Short term option plays like this are really risky and your quick 300% gain could turn to a complete loss within an hour, and with only days to see a move back to the positive, you could run out of time.

I'd sell the calls, and take the 300% profit for some longer term Calls. When you buy those new calls is up to you. Many might be waiting for a pull-back, but I gotta think some shorts are getting squeezed right now.
 
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#122
smorgasbord said:
Short term option plays like this are really risky and your quick 300% gain could turn to a complete loss within an hour, and with only days to see a move back to the positive, you could run out of time.

I'd sell the calls, and take the 300% profit for some longer term Calls. When you buy those news calls is up to you. Many might be waiting for a pull-back, but I gotta think some shorts are getting squeezed right now.
Click to expand...

Thanks. I think you're right, I'll sell 12 of the 15 contracts now and hold 3 until Monday and sell them then. I also did buy a number of longer term calls, even some Jan'15 last week (when TSLA was at $55).
 
#125
ShortSlaver said:
Volatility. Look at the greeks and check the Vega for the option.
Click to expand...

cwerdna said:
Looking at the theta will help you w/that.

As I mentioned, TOS has a theoretical price calculator. You can change the date, stock price and IV.
Click to expand...

Thanks all. I'm learning as I go :).

Update:

OK, so after taking some nice profits from some of these short term plays I'm looking to get some real good exposure to a possible (continued) squeeze with options (not touching my stock position for now) with the "house's money". My reasoning is that there is a possibility of a continued upwards squeeze that could result in an exponential short-lived inflated peak which then falls to a new trading range that I would suspect would be a lot higher than where TSLA used to trade, but still much lower than the peak of the squeeze. For instance let's say it peaks to $160 and then retreats to a new trading range around $80.

Now with regards to options, my thinking is that if we saw the above scenario play out then when TSLA was at the peak I guess at one point it would be kind of obvious to most investors that the price was "artificially high". And with that in mind, would we see the normal phenomenon with options, where the time-value and hence price is higher the longer the time remaining on the option? Here is an example of the out-of-the money $80 calls:

calls.PNG


Or would we see a scenario where perhaps an short term option (say the June '13) would have higher time-value/extrinsic value than for example the Jan '14 option???

The reason I'm interested in this is that if I want to set myself up for maximum exposure to a possible squeeze playing out in the near future, why would I pay for a lot of time value on longer term options? Or perhaps it could even be that the short-term options turn out to be higher valued during the actual squeeze?

And on this note, if there is anything to my reasoning, would you guys think the June '13 or perhaps the Sept '13 options would be better? (Or maybe I'm completely off here?)
 
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#126
Johan said:
Or would we see a scenario where perhaps an short term option (say the June '13) would have higher time-value/extrinsic value than for example the Jan '14 option???
Click to expand...

Well, no one else is taking a stab at this...I think it's quite possible to SEE that due to higher liquidity of the shorter term options, but I would think that just based on the numbers that it wouldn't make sense. You can exercise "American options" at any point so there is no advantage to the shorter term option, worst case the time value of the farther out dated option would come down to match the shorter term one, the shorter term one can not be more valuable as it isn't any better than the farther out one.

To answer your scenario question: if during a squeeze the price is going up kind of quick the shorter term options might be more expensive than longer term ones because they are being traded faster, but eventually someone (or someone's program) will see those farther out options as a pretty good deal and snatch them up, raising their price up to match the shorter ones. If YOU are that person then you might get yourself a good deal but I wouldn't expect it to happen? Please take all I say with a grain of salt, I'm a newbie trader (I'm the one who started this thread ;) )
 
#128
bhuwan said:
I am thinking of dabbling in options, but wonder if it's too late, given the current price of the stock and the cost of the options. Any suggestions?
Click to expand...

IV right now is INSANE. All of the options are very expensive right now. Well, they were expensive in April (I was advised in April it wasn't a good time to get in) and now they are REALLY expensive. If you think the current price is the bottom then who cares about the volatility, any rise in intrinsic value will still make you money. I don't think anyone can safely say that right now, though. I have sold many of my options and "rolled them up" as I locked in gains this way while still having some skin in the game. Personally I wouldn't have bought them though if I was just starting fresh, I would be waiting for the IV to go down (or maybe buy 1 or 2 contracts just to get a hang of the process).

As a newbie to a potential newbie options are insane. At the end of yesterday I was looking at my account and the market value of my options I hold right now made my eyes bug out. I really don't want to push my luck as it's been really good so far and plan on selling several more contracts Monday (if it's not too late) and just let the money sit in my account as cash until IV goes down or share price goes down. The fact that I could have had the opposite result and have lost all my money is really humbling (though to be honest I never really put that much in, haha). My strategy is to keep my shares in long as my core position and use options as my gravy, they're nice to have but not depending on them to make me money. I really don't want to get comfortable with them as I know I've just been really lucky so far.
 
#129
Jonathan Hewitt said:
IV right now is INSANE. All of the options are very expensive right now. Well, they were expensive in April (I was advised in April it wasn't a good time to get in) and now they are REALLY expensive. If you think the current price is the bottom then who cares about the volatility, any rise in intrinsic value will still make you money. I don't think anyone can safely say that right now, though. I have sold many of my options and "rolled them up" as I locked in gains this way while still having some skin in the game. Personally I wouldn't have bought them though if I was just starting fresh, I would be waiting for the IV to go down (or maybe buy 1 or 2 contracts just to get a hang of the process).

As a newbie to a potential newbie options are insane. At the end of yesterday I was looking at my account and the market value of my options I hold right now made my eyes bug out. I really don't want to push my luck as it's been really good so far and plan on selling several more contracts Monday (if it's not too late) and just let the money sit in my account as cash until IV goes down or share price goes down. The fact that I could have had the opposite result and have lost all my money is really humbling (though to be honest I never really put that much in, haha). My strategy is to keep my shares in long as my core position and use options as my gravy, they're nice to have but not depending on them to make me money. I really don't want to get comfortable with them as I know I've just been really lucky so far.
Click to expand...
Thanks
 
#130
Jonathan Hewitt said:
IV right now is INSANE. All of the options are very expensive right now. Well, they were expensive in April (I was advised in April it wasn't a good time to get in) and now they are REALLY expensive. If you think the current price is the bottom then who cares about the volatility, any rise in intrinsic value will still make you money. I don't think anyone can safely say that right now, though. I have sold many of my options and "rolled them up" as I locked in gains this way while still having some skin in the game. Personally I wouldn't have bought them though if I was just starting fresh, I would be waiting for the IV to go down (or maybe buy 1 or 2 contracts just to get a hang of the process).

As a newbie to a potential newbie options are insane. At the end of yesterday I was looking at my account and the market value of my options I hold right now made my eyes bug out. I really don't want to push my luck as it's been really good so far and plan on selling several more contracts Monday (if it's not too late) and just let the money sit in my account as cash until IV goes down or share price goes down. The fact that I could have had the opposite result and have lost all my money is really humbling (though to be honest I never really put that much in, haha). My strategy is to keep my shares in long as my core position and use options as my gravy, they're nice to have but not depending on them to make me money. I really don't want to get comfortable with them as I know I've just been really lucky so far.
Click to expand...

Excellent strategy IMO. I keep a small stock position and a larger min LEAP position for long term. But at the current levels and prices I'm staying both at min until pullback. Won't be adding new options from here and any increase will result in further roll ups from this investor. I believe the investment is falsely priced here by those who chose wrongly that Tesla would go under and I won't proactively invest in that dynamic. I will hold a minimum long position however.
 
#131
Johan said:
And on this note, if there is anything to my reasoning, would you guys think the June '13 or perhaps the Sept '13 options would be better? (Or maybe I'm completely off here?)
Click to expand...

I'm of the opinion that LEAP's are just not a good value right now. I bought a bunch of $45.00 and $50.00 Jan 14 C when TSLA was at $35 and they were dirt cheap all things considered. I've sold those and rolled into shorter term options that were still cheapish a couple weeks ago and have sold those and rerolled new options Thursday which I sold Friday as it was just too much to pass on.

I'm out of options currently and don't like the prices of them as the stock is so volatile and it's impossible to know if it's going to go up 10% or down 10%. Are we at the peak and looking to settle in the mid-60's? Are we on our way to $100 in a week or 2? I feel like I played a lot of option games when the timing was perfect and I had to take my profits on them.

Analysts have vastly differing targets for TSLA from $62, $68, $75 to $100. It's anyones guess.

However, as I said I feel LEAP's are dangerous because there just too much short term volatility.

A straddle play or strangle seems almost appropriate right now.
 
#132
Wow I must be the luckiest options newbie ever. Or perhaps not only luck? I bought a bunch of different short term calls when the stock was in $70's territory (May and June expiration). Have had hue gains with these and couldn't resist selling off the majority of these (around 2/3rds) at market open today (TSLA opened around $92-93). But I had this feeling that I should keep a few of the outliers (May $95, June $100) just in case Elon drops a bomb announcement this week and refuels the squeeze... Looks like there is still a possibilty of that happening.

Anyway, my original $10k is now $30k in cash and another $30k in open positions! A big thank you to everyone on TMC who have contributed to the discussions and educated me along the way! By the way the best part is that I've decided not to touch my stock position for years to come, such a good feeling having taken that decision and still being able to benefit short term.
 
#133
Johan said:
Wow I must be the luckiest options newbie ever. Or perhaps not only luck? I bought a bunch of different short term calls when the stock was in $70's territory (May and June expiration). Have had hue gains with these and couldn't resist selling off the majority of these (around 2/3rds) at market open today (TSLA opened around $92-93). But I had this feeling that I should keep a few of the outliers (May $95, June $100) just in case Elon drops a bomb announcement this week and refuels the squeeze... Looks like there is still a possibilty of that happening.

Anyway, my original $10k is now $30k in cash and another $30k in open positions! A big thank you to everyone on TMC who have contributed to the discussions and educated me along the way! By the way the best part is that I've decided not to touch my stock position for years to come, such a good feeling having taken that decision and still being able to benefit short term.
Click to expand...


yep nice move- good idea to take a big chunk of profit on those I believe. Holding the stock, moving in out of options is a good play- you can also add to the stock position with some LEAPS if the price comes in
congrates ! :)
 
#134
Johan said:
Wow I must be the luckiest options newbie ever. Or perhaps not only luck? I bought a bunch of different short term calls when the stock was in $70's territory (May and June expiration). Have had hue gains with these and couldn't resist selling off the majority of these (around 2/3rds) at market open today (TSLA opened around $92-93). But I had this feeling that I should keep a few of the outliers (May $95, June $100) just in case Elon drops a bomb announcement this week and refuels the squeeze... Looks like there is still a possibilty of that happening.

Anyway, my original $10k is now $30k in cash and another $30k in open positions! A big thank you to everyone on TMC who have contributed to the discussions and educated me along the way! By the way the best part is that I've decided not to touch my stock position for years to come, such a good feeling having taken that decision and still being able to benefit short term.
Click to expand...

I'm in your boat, bought the stock a few weeks back along with the June 60s. I sold those and bought the 80's on the open last Fri and quickly sold them 50 min later at Friday's peak. I also bought some 90's and 100s on Friday. This morning I should have sold half of each when she hit 96 but the greed in me (and MS's upgrade to 103) said to hold them until she hits 100. Clearly that never happened and at around 1pm I really though the bottom was going to drop out. Luckily she's held nicely around the low to mid 80's and which will be a nice base for Elon's next announcements.
 
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